Some Recently Read Material

Thursday, August 27, 2009

TALF Backing after Bailout

This kills me. Bank of America buys the nations worst mortgage lender, Countrywide, then buys the largest retail broker, Merrill Lynch, gets bailed out with government money for the 2 lousy deals, and now floats FDIC backed debt for consumers to buy cars! They are getting government backing on the debt but they keep the profits!! What is wrong with this picture.

Asset-Backed Securities
Bank of America/Merrill Lynch is in the market with a $1.995 billion auto loan-backed deal, according to a person familiar with the matter.

The deal is eligible for a Federal Reserve program, the Term Asset Backed Securities Loan Facility, or TALF, through which investors can procure cheap loans to buy newly created consumer loan-backed and new and existing commercial mortgage-backed bonds.
Bank of America's deal, dubbed BAAT 2009-2, is jointly led by Bank of America/Merrill Lynch, Barclays Capital (BCS), Citigroup, Credit Suisse Group (CS) and Royal Bank of Scotland Group PLC (RBS).

Last month, Bank of America sold a $3.993 billion auto-loan backed deal at 135 basis points over a benchmark. That was the bank's first deal eligible under TALF.

The bank is completely ripping off everyone in their retail banking business, ripping off the government in their participation in government debt issues and is a monolithic monster of a banking organization to boot (yes, "to big to fail").

This program needs to stop. If the "markets" cannot finance consumption at these ridiculously low subsidised interest rates it means the interest rates are not realistic and the Fed needs to allow the markets to operate!!

The longer the Fed subsidises interest rates for everything from consumer loans to mortgages the longer it is putting all of the financial institutions and the FDIC in the tank when the subsidized interest rates are "rebalanced" to the "real" market interest rates down the road and all of the financial institutions freeze up again because their returns on subsidized capital deployed will not allow them to be profitable when they have to pay substantially higher rates to access the markets for liquidity.

This is elementary stuff guys. Stop the subsidized consumption loans NOW before you put our entire financial system (and now the taxpayer) in a real pickle about 12-18 months from now and throw the country into a REAL DEPRESSION with no more options left...

NOW

Fed Urges Secrecy on Banks in Bailout Programs

The out right insult of the title here, the headline in a Reuters article today is indicative of how bad the folks running the Fed are. From their insistence as far back as 2006 that the Trillions of dollars in Insurance Protection floating on unregulated markets would not harm the greater economy to their indiscriminate bail out of multiple unregulated companies while allowing many of them to become banks under accelerated application processes to their obvious ignorance of market mechanisms whereby allowing savvy institutions to rake in Billions in profits from the various Fed programs to float debt and buy back debt (print money) to the absolutely unconscionable allowing of financial and non-financial firms to float Private Debt with direct Public Backing through the FDIC to the complete take over of the consumer and mortgage credit markets to the tune of a couple Trillion Dollars...

Now they want total secrecy. The Fed is paranoid and incompetent and they are "spending" taxpayer money with abandon (flooding the banks with cash through buybacks of debt) while supporting without oversight firms they deem "to big to fail" at the same time they and the FDIC continue to encourage the building of more institutions that are "to big to fail" all the while inviting "private equity" and other unregulated non "financial" firms to buy into their tottering financial system.

Where does this end??? I have had it with these guys and our legislators are complete incompetent, impotent wimps with no backbone to deal with the Fed. Where are they in all this discussion?

From the Article

* Fed urges judge not to enforce order pending appeal
* Banks say disclosure could cause loss of confidence
By Jonathan Stempel

NEW YORK, Aug 27 (Reuters) - The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy....

Preska (Chief Justice Loretta Preska) said the Fed failed to show that revealing the names would stigmatize the banks and result in "imminent competitive harm." The Fed asked the judge not to require disclosure while it readies an appeal.
"Immediate release of these documents will cause irreparable harm to these institutions and to the board's ability to effectively manage the current, and any future, financial crisis," the central bank argued.

It added that the public interest favors a delay, citing a potential for "significant harms that could befall not only private companies, but the economy as a whole" if the information were disclosed.

Give me a break. At this point does it matter? We all know the firms that almost went under, the ones that are technically insolvent and only operating because of the accounting changes instituted early this year. There is no "news" to be revealed in disclosing this other then for the Citizens of this Nation to have the right to see how the Washington Financial Elite bailed out the Wall Street Financial Elite after their House of Cards came crumbling down.

Give me a BREAK!!

Tuesday, August 11, 2009

Goldman Tentacles

For a company like Goldman Sachs to make something like 60% of it's profits from commodities / currency trading it is no wonder why they are so good at it. As I said before, they have heavily invested directly in the production, transportation, storage and processing of all of the commodities they trade for themselves and their "clients". In addition to their business tentacles they have in house knowledge of all of the funds and traders they handle accounts for, what they are buying and selling, hence they know the inside and outside of what many folks are doing.

This is another example of their investment in an industry that allows them a good view what what is happening with respect to transport. (taken from The Virginian-Pilot, Norfolk, Va.)

A 140-plus-page proposal from a partnership of Carrix Inc. and Goldman Sachs Group Inc. would form either an "operational partnership" with the Port Authority, a "financial re-engineering of the balance sheet utilizing Goldman's extensive knowledge and experience in the capital markets," or both, according to a cover letter from Bob Watters, Carrix's vice president/director of business development.

Carrix Inc. is the Seattle-based parent of SSA Marine, Tideworks Technology and RMS Rail Management Services, which makes it the world's largest privately held marine and rail terminal operator, according to its Web site.

Goldman Sachs Infrastructure Partners, a unit of the New York investment bank Goldman Sachs, acquired a 49 percent stake in the company in July 2007.

Sunday, August 09, 2009

Diverting Foreign Aid

I must comment on the idea that pulling down our $100 billion in foreign aid to help other initiatives in the US is somehow going to be “good” for America. This argument pops up every time the US Mindset returns to focus on the disastrous budget deficits we have been running for nearly 2 generations now. Unfortunately, like the ups and downs of our economy, all discussion related to the deficit dies as soon as the economy turns the corner and people go back to focusing on making money in the latest paper bubble. It is also unfortunate that these incredible "peace time" budget deficits do little more than expose the underlying reality that the US economy has become so reliant on consumer spending and non manufacturing "industries" that our bubble to burst cycles have become more frequent (about every 10 years) and more dramatic. Obviously, with the economy based on businesses that have no physical infrastructure and or physical output capacity (the production of intangible products) they are able to grow rapidly when able to exploit the latest economic / financial gimmick and can just as rapidly shrink when that "event" is played out. Consumption as we all know is primarily of foreign made products of all varieties.

Getting back to the argument that somehow reducing our "foreign aid" and bringing back a few billion dollars back to the US as having any tangible ability to "enhance" our economic development. This is a completely false argument and even when foreign aid has been reduced during tough economic times, it quickly returns during boom times and is usually a greatly celebrated event stamped by whoever happens to be in the White House as an example of the how "generous American" people are willing to back whatever pop-charity is prevalent at that time.

Before I go on, I will preface my argument with my own jaded view of the machine that functions in Washington of ex-piece-corp / lobbyist / international "aid" how to make $200k a year "non-profits" with "do gooder" figurehead cronies "leaders" related to the various politicians, lobbyist, ex-politicians etc., all of whom are very good at raking money out of the Federal Government to feed themselves using their idealistic agenda. These many folk are professional and very good at making carriers for themselves, backed by US Gov money under the guise of "international aid" and normally spend most of their time traveling the world, speaking, living in posh neighborhoods of DC and otherwise justifying their idealistic agenda to other folks who look just like them or aspire to create their "careers" picking up in their footprints. The vast majority of US Foreign "aid" goes in the pockets of these folks and their extended networks and little of it gets anywhere near the end "user" or "target" of the program or individuals it was designed to "help". I could go on but you get the point. In addition, the "International Aid" machine in Washington and associated labyrinth of non-profits (most often not of international focus) are also often the best way to pay for access to the political machine. "Give $50k to my wife's / sister's / friend's / ex-business partner's / other relative's charity and we can talk" kind of politics.

Having said all of that, I will go back to the argument that somehow reducing foreign aid is going to better our economy if we redirect that cash. We have directly spent since our pointless invasion of Iraq no less than $1 Trillion. I remember Bush's speech during the height of the financial crises when talk of $700 billion to bail out financial institutions was being thrown around and thinking, "George, why don't you just say it? You know how much $700 billion is, you spent more than that battling your fictitious "enemies" on the other side of the planet for the past 5 years." George could have just said, "T-ain't anything America. Just deal with it. I know the war was a great excuse to use my access to the largest "bank" on the planet to write checks to my friends and buddies, esp. the ones who lost so much money in the .dot com crash and Enron like debacles of the early part of my presidency, but this, well, now we have another "crises" primarily created by my friends and I got no nation to invade so please excuse me if I just hand this money over directly to them this time!"

Well, that is reality you know. So what about "foreign aid"? What about pulling our vast military presence out of Japan, 2/3 of it out of Korea and Europe? What about exiting Iraq? Can we get that Trillion Dollars (plus the estimated Trillion or so legacy costs) back? Never. What about the pointless war in Afghanistan? Does anybody ever ask themselves what the real long term ramifications of a decade war against Muslim extremist around the globe will have on the long term desire of these folks to one day actually organize themselves some kind of multi-nation alliance and truly threaten other nations? I mean really, right now and for the years going back to the beginning of radical Muslim movements against nations outside of Israel (the true root of all this mess), was there ever a time in modern history they had the potential to do anything more than cause a bit of terror by blowing something up with some rudimentary explosive devises or come up with more creative ways to use our own technology against us like in the 9.11 "attack"? Come on? Help me out here. How many Americans ever went to bed worried that some "army" from the middle east would invade their shores? We and a few other developed nations feed our "allied" Muslim nation friends all of their military technology for crying out loud. These folks cannot even make a microphone or CD player in their own nations let alone a computer or sophisticated guidance system, navy fleet, air force or any other mass weapon arsenal necessary to threaten other nations. Isn't it true the primary reason we don't want Iran to develop the technology to enrich uranium is that we really don't want any of the nations on the planet that do not align themselves with our capitalist / "democratic" value system to have the ability to create ANY technology or products which could head them in the direction of being able to create real weapons of mass destruction like we do?

And so with all this, is taking $25 or $50 billion out of our "foreign aid" going to solve anything? We are directing hundreds of billions of dollars every year to our global military infrastructure; billions more are spent subsidizing our agricultural and agricultural exports; billions more are being spent / or credited to companies for the removal of fossil fuels from all corners of the planet; billions of dollars are being sucked out of our economy, from each individual, by companies operating within pathetically designed regulation / lack of regulation of our energy companies and infrastructure; billions of dollars are being sucked out of the American taxpayer every year for the construction of and maintenance of a transportation infrastructure designed specifically for the single most destructive product in use on the entire planet, the automobile; billions of dollars in energy literally escape right in the atmosphere by the pathetically designed and geographically dispersed regulation of building standards that allow millions of structures to be built annually with the environmental soundness of a mid 20th century box; billions of dollars are being spent incarcerating millions of Americans each year instead of educating them (with more of these dollars going into private hands each year);billions of dollars are being sucked out of the wealth of people, their pension plans and their governments around the planet monthly by the vast unregulated financial industries that have learned to rake as much cash out of the planet's financial wealth as possible with no nation, government, regulatory authority or power to answer to but the pursuit of as much wealth as humanly possible... I could go on about how many ways $25-$50 billion a year are completely wasted, lost, sucked into the coffers of companies riding the "free economic" poorly regulated and wasteful economy we have created but I will rest here.

Suffice to say, any person who decides to go after the politically easy, populace target of "foreign aid" when the true causes of our financial mess and destructive economic model lies right in front of us, is only succumbing to a failed logic and worse, exposing themselves to a deeper sense of "America is right and great and we should look after ourselves even if much of what we do economically and militarily is pathetically harmful to the planet and humanity in general."

Thursday, August 06, 2009

CFTC Derivatives Limits

I am forever amused by Washington's half-hearted and weak attempts to "regulate" various aspects of the financial markets. All of the approaches they are taking or attempting to take are weak and useless and easy to circumvent.

Most amusing is when a company like Goldman Sachs says out of one side of their mouth that they support limiting exposure to commodities contracts to speculators and at the same time out of the other side of their mouth they are saying, "We are the exception because of our unique offerings and the need to be able to have unlimited access and exposure to 'protect ourselves' against the exposures we offer to our clients.

There is nothing Goldman would like better than to limit other's exposure so they can have even more power in the market place. Goldman is nothing but a big gambling house. Look at the "products" they offer regularly. They are like, "I will pay you X amount of money if you buy this "contract" and the value of the underlying "asset" or "index" increases or decreases in value over Y amount of time". They limit ones gains but not losses. They also "protect" themselves against losses with derivatives.

There is NO limit to the amount of these types of products they can and do offer. This is only one example of how Goldman "creates" products based on underlying derivatives and commodities and indexes and hedges themselves against losses.

There is no legitimate reason for these products to exist. Goldman simply games the market. They use the billions they earn with massive leverage in the derivative markets to buy real assets where they control and monitor the output of the various commodities they are trading. They own directly or indirectly all types of commodity storage facilities, distribution facilities and outright production.

Goldman and Morgan Stanley should be immediately stripped of their bank holding status they were granted during the financial crises (along with Cap One, American Express, State Street and a host of other non retail bank finance companies as well as forced to repay all government guaranteed debt outstanding at artificially low government backed interest rates. They are fast back to their old formulas of risk taking and gambling.

The CFTC is NOT the agency to be doing piecemeal regulation. The financial industry needs total overhaul and total regulation and we desperately need a return to the Glass-Spiegel Act days of separating retail banking from insurance from investment banking etc. We need total regulation of the hedge fund industry and we need to come up with completely new ways to deal with the way in which the financial industry has learned to game the entire market with technology, leverage and control.